Market – Supply Sources – Cost Analysis

A vote to continue challenges the steering committee and adviser to identify suitable markets, sources of supply, and service providers and their requirements. Here are some ways to gain this information:

1. Use previous research and industry common knowledge.

2. Survey market, supply, or service provider sources. Although the adviser should be primarily responsible for developing the questionnaire, this phase should be a joint effort. Contact users of the services, potential buyers or suppliers, to determine their requirements.

3. Ask State and/or Federal offices (such as the Rural Development offices, Extension Service, or community action agencies), universities, cooperative centers, commodity organizations, or private consulting firms to conduct the research and use their findings.

The adviser analyzes the survey results. This process may determine the scope of the cooperative’s activities. Contacts are then made, either by the adviser or steering committee members, with engineers, equipment dealers, real estate agents, and others for cost estimates on establishing and operating the cooperative’s physical facilities.

The adviser reports on the potential markets or supply sources to the steering committee. Once the report is approved, the steering committee calls the third general meeting. The adviser presents the preliminary market or supply estimation and cost analysis. Both are subject to change.

After the market or supply report is discussed and accepted, the group should vote by secret ballot on whether to continue the organizational process. By now, the steering committee and adviser should have a good idea of the minimum volume of business, number of members, and financial commitment needed to justify starting the cooperative. Where support is questionable, the token investment should be refunded.

Supporters should sign a premembership agreement (Appendix III). This agreement helps determine the extent of serious interest in the proposed cooperative. The signer agrees to join, patronize, and furnish a specific amount of initial risk capital.

Initial investment by members should be in proportion to their intended use of the cooperative, but start at a minimal amount such as 10 percent of potential risk capital (equity) needed to operate. This goal should be met before continuing organizational efforts.

Potential members should be given a written statement about how their investment will be used and procedures for returning unused funds if the project is terminated or the individual later decides not to join. The money should be deposited in an interest-bearing account and records kept of investments and expenditures. Generally, this money is used for organizational costs like supplies, postage, phone bills, and attorney fees.